What is a limited company?
A private limited company (Ltd) is the most popular business structure in the UK. It is a legally separate entity from its owners — meaning the company can own assets, sign contracts, and incur debts in its own name. Crucially, the personal assets of shareholders are protected: if the company owes money, shareholders are only liable up to the nominal value of their shares.
Limited companies are managed by directors (who run day-to-day operations) and owned by shareholders (who hold shares in the company). A single person can hold both roles, making it a highly flexible structure for sole founders.
Unlike sole traders, limited companies pay Corporation Tax on their profits — currently 19% for profits up to £50,000 — rather than Income Tax. Combined with the ability to pay yourself a tax-efficient mix of salary and dividends, this typically results in significantly lower tax bills as your business grows.
Limited company vs sole trader
| Feature | Limited Company (Ltd) | Sole Trader |
|---|---|---|
| Personal liability | Limited to shares held | Unlimited — personal assets at risk |
| Tax rate on profits | 19–25% Corporation Tax | Up to 45% Income Tax |
| Tax-efficient salary | Yes — salary + dividends | All income taxed as earnings |
| Business credibility | High — registered entity | Lower — no registration |
| Raising investment | Easier — issue shares | Much harder |
| Annual obligations | Accounts + confirmation | Self-assessment only |
What's included in your formation
When you form a limited company through Sterling Formations, your application includes everything required by Companies House. There are no hidden fees or optional extras that are actually mandatory.
- Electronic filing with Companies House
- Certificate of Incorporation (PDF)
- Memorandum of Association
- Articles of Association (standard)
- Share certificates for all shareholders
- Company Registration Number (CRN)
- Tide business bank account application
- Partner offer, if available
Four reasons to form a limited company now
Personal asset protection
Your home, savings, and personal property are ring-fenced from business debts. Sole traders have no such protection.
Tax efficiency
Pay Corporation Tax at 19–25% on profits, then draw dividends at lower rates. Most founders save thousands annually.
Easier to grow
Issue new shares to bring in co-founders or investors. Sole traders cannot distribute ownership without complex restructuring.
Professional credibility
Many larger clients, agencies, and government contracts require suppliers to be incorporated. An Ltd opens doors a sole trader cannot.
Related pages
Frequently asked questions
What is limited company formation?
Limited company formation is the process of legally incorporating a private limited company (Ltd) at Companies House. The company becomes a separate legal entity, distinct from its shareholders and directors, providing limited liability protection.
How much does limited company formation cost in the UK?
The Companies House filing fee changes from time to time, so check the current official fee before applying. A third-party partner offer may cover or reimburse a fee, but it is subject to the provider’s current terms and eligibility criteria.
How long does it take to form a limited company?
Companies House processing times vary and are not guaranteed. The online application length depends on your company details, directors, shareholders, and the information you need to provide.
What is the difference between Ltd and PLC?
A private limited company (Ltd) cannot offer shares to the public. A public limited company (PLC) can list shares on a stock exchange. For most new businesses, an Ltd is the appropriate structure — it has fewer regulatory requirements and is simpler to set up.
Do I need an accountant to form a limited company?
No accountant or solicitor is required to form a limited company. The entire process is handled online. However, once trading, most limited companies benefit from professional accounting help for Corporation Tax returns and statutory accounts.
Can one person form a limited company?
Yes. A single individual can be the sole director and sole shareholder of a limited company. There is no minimum number of shareholders or directors beyond one.